Over the past four years of recession, we have seen a re-run of the debate that surrounded the Great Depression. In the 1930s, there were those, like Herbert Hoover, who insisted that austerity – by cutting government spending – was the way to beat recession. Others, like John Maynard Keynes, were convinced that the remedy was stimulus and expansion.

In the event, it was a no-contest – and so it is today. It is now clear that the austerity being inflicted on the benighted Greeks cannot work, but even the other “PIGS” – Portugal, Ireland and Spain – who have done everything required of them by the austerity disciplinarians, have found that they are going backwards, deeper into recession and with a rising ratio of government debt to GDP.

And while the British may have avoided the problems of euro membership, they chose to impose their own home-grown austerity. The result? They are mired in a recession that threatens to be worse for them than the 1930s.

In the US, by contrast, President Obama’s stimulus programme – bitterly opposed and relatively timid as it was – is pulling the US economy around. There can now be little doubt that stimulus is the key to beating recession. The time for austerity policies, after all, is when the economy is booming; in a recession, they are the last thing we need.

As that reality becomes increasingly difficult to deny or ignore, where do we in New Zealand stand? Sadly, we find ourselves with Herbert Hoover, down an ideological cul-de-sac with nowhere to go. The proponents of the current orthodoxy now don’t even bother to defend it; they promise merely a continuation of the long drawn-out stagnation – resorting, like school-kids in the playground, to challenging their critics to offer something better.

The critics seem increasingly ready to respond to that challenge. A recent example is Bernard Hickey’s interesting suggestion that we should consider “quantitative easing” (or, as it used to be called pejoratively, “printing money”).

It may not be the first option to come to mind but it is not as way-out as it seems. Many governments (including the current UK and US governments) have “printed money” from time to time – and banks do it all the time, lending money that they do not have, and thereby creating most of the money in our economy out of nothing. If it’s all right for them to make billions from doing so, why shouldn’t governments do it in the public interest, and so get the economy moving?

There are, of course, many other proposals that offer an alternative to the failed orthodoxy. Here, in 400 words, are a few suggestions, which – if implemented – would go to make up a coherent programme.

· Put beating unemployment centre stage by investing in much-needed infrastructure projects, so as to raise demand and create new jobs –a virtuous circle which would also help retailing, and private sector investment and productivity.

· Get the exchange rate down to improve competitiveness so that higher demand is met by New Zealand, and not foreign, industry; do so by ending the use of high interest rates and over-valuation as counter-inflation tools and focusing instead on the real cause of inflation – excessive and irresponsible bank lending for non-productive purposes. As soon as foreign speculators are denied an interest rate premium and an unearned capital gain, the dollar’s value will fall.

· Remove the balance of trade constraint on expansion by boosting exports through improved competitiveness, so cutting the interest and profits paid to overseas lenders and owners; this will allow us to expand while paying our own way, so reducing the need to borrow overseas or to sell our key assets to foreign owners.

· Encourage saving and exports rather than consumption and imports by promoting further saving through tax breaks, and – since imports will become comparatively more expensive than domestic production – reduce the incentive to spend on cheap imports at the expense of New Zealand jobs and production

· Tackle the government’s deficit by collecting a sharply increased tax take as a more buoyant economy generates much greater tax revenue

· Reduce widening inequality by discouraging excessive salaries, introducing a fair tax system (including a capital gains tax) and stopping the destructive insistence on inflicting the cost of the recession on those least able to bear it – the low-paid, the unemployed, and beneficiaries.

· Expect improved competitiveness, productivity and profitability in the private sector to stimulate increased investment, especially in skill training, education, and research so as to utilise fully our potential human capital and achieve an economy that reaches its full productive potential.

· Develop a close understanding of and support for Maori aspirations, given that Maori offer an important potential stimulus to new development and seem to have leaders with a better understanding than pakeha – on issues like asset sales – of what the country needs.

· Ensure that new investment is encouraged to develop advanced – and particularly environmentally friendly – industries based on green technologies.

This is all just common sense; none of it is revolutionary. It would rescue us from recession and set us on the right course for the future. It would optimise the market’s strengths and minimise its weaknesses. Don’t let anyone tell you there is no alternative.

If the “filthy rich” are no longer rich, how are we now to describe them? The question is not a new one; the role of those who gouge wealth out of the rest of us by manipulating existing assets has long been an issue of controversy. It was Winston Churchill who, as Chancellor of the Exchequer, said in 1925, “I would rather see Finance less proud and Industry more content.”

The importance of the City of London to the British economy dates back more than 150 years. As the world’s wealthiest country at that time, it was perhaps understandable that we would develop an expertise in maintaining the value of our assets rather than in creating new ones. For good or ill, the management of financial assets became a more significant feature of our economy than of any other.

The disproportionate influence of the City was a major factor, through issues like exchange rate policy which was always rigged to favour asset-holders rather than wealth-creators, in our decline as a manufacturing country. It was only thirty years ago, however, that the policy bias really began to bite.

The critical development was the removal of exchange controls by Ronald Reagan and Margaret Thatcher. In one bound, international capital was free – free from the irksome business of having to comply with the requirements of governments representing democratic electorates, free to roam the world in search of the most favourable (even if short-lived) investment opportunities, free to behave quite irresponsibly since regulation had become a dirty word and a duty of care was owed to no one but the shareholders.

The City seized upon the opportunity. An expertise in managing, re-arranging, packaging, and creating new financial assets, and clipping the ticket in the process by means of huge bonuses and commissions, became the path to untold riches. So impressed were governments – and not least New Labour – by the wealth apparently created, so dazzled were they by the super-rich, that they deferred to them in every respect, getting off their knees only occasionally to heap yet more praise upon them.

But while the filthy became rich (and some, as witness Sir Fred Goodwin, remain so), what happened to the rest of us? Most of us were left far behind in the scramble for the goodies. The gap between rich and poor widened dangerously, and our masters were left wondering as to why society was no longer as integrated as it had been.

And while a few became rich, our economy was left dangerously dependent on the manipulation of financial assets. As the masters of the universe topple off the high wire, we now see that the British economy is worse placed to face the crisis than any other.

For much of the global economy, the collapse of financial institutions and services is a crisis of credit and liquidity. The impact on the productive economy – where real goods and services are produced and sold – has been real enough, but when, sooner or later, the flow of funding is restored, so too will the productive economy recover.

For us, however, the crisis is not just one of liquidity. It is one of solvency – and the solvency (and future viability) in question is that of a major part of our economy, one that we used to think would go on providing a growing proportion of our export earnings and our real national wealth and income.

Our problems are intensified because our reliance on financial services has meant a corresponding and catastrophic decline in our capacity to produce real goods and services. The proportionate contributions of banking and financial services to our GDP and total employment have been growing while those of manufacturing have been falling and that trend had been gathering pace.

The collapse of our banks and financial institutions means that we are left with a gaping hole in our ability to maintain our standard of living. A whole chunk of what we thought was our capacity to create wealth has literally disintegrated. Our ability to pay our way in the world may now rest on those activities like manufacturing which have been neglected and starved of investment for so long that we simply cannot breathe life back into them overnight.

Little wonder, as the volume of the government debt incurred to bail out the banks rises, that international commentators see a bleak future for us and advise investors to get their money out of Britain and out of British assets. Little wonder that the housing market is flat on its back and that the pound has dropped like a stone.

Even draconian action, like leaving the banks to sort out their own solvency problems and treating the creation of credit as a public rather than private responsibility, would do little to turn things round in the immediate future. Sir Fred may continue to live the high life on his pension, but the rest of us are paying a heavy price for the greed of a few and for the failures of successive governments to do the job they were elected to do – and we will go on paying that price for a long time to come.

As the global financial crisis unfolds, each country responds by seeking to protect its own institutions and economies. New Zealand is no exception. The steps we have taken have been sensible and – so far – effective in shoring up our economy as well as we can against the immediate prospects of worldwide recession and financial meltdown.

Soon, however, we and others must lift our eyes to more distant horizons – not just further into the future, but across a wider spectrum. The responses that must now be made cannot be merely national in scale, but must take an international dimension as well.

And it is when we look to that international landscape that we get a real sense of the change that has taken place. The world has truly shifted on its foundations. The agenda moving forward and the ideas now being discussed are now hugely different from anything that was thought worth considering even a few months ago.

Three years ago, I wrote a book called The Democracy Sham: How Globalisation Devalues Your Vote. In it, I developed the thesis that the global economy had dangerously sidelined democratically elected governments who found themselves no longer able to withstand the pressures placed upon them by international capital. The result was that unregulated markets were in effect out of control, with no restraining influence exercised by those we elected to protect us from the abuses and excesses perpetrated by a greedy and powerful minority.

I canvassed a number of solutions to these pressing problems. Some were national in scale, involving changes in national economic policy – a widening of the goals of that policy, a willingness to regulate the “free” market, a proper role for government as opposed to bankers, and a greater concern for social justice.

Other proposals, however, addressed the international scene. New Zealand has more than most to gain from a better regulated international financial structure. We would benefit greatly from less volatile exchange rates, from some diminution in the huge daily flows of “hot money” around the globe, and from a more prudent policy on the part of those who have driven the credit creation on which the global economy has perilously – and fatally – depended.

Many of these ideas were no doubt dismissed as irrelevant, possibly eccentric, even dangerous and misguided. What is now intensely interesting is the extent to which this kind of thinking has now – in a remarkably short time – entered the mainstream.

A striking indicator of how the picture has changed can be found in the debate on the world economy that has just taken place in the United Nations. Some of the world’s leading economists – like Joseph Stiglitz and Prabhat Patnaik – have presented papers in which they look to a new agenda going forward and are prepared to consider proposals that only a short time ago would have been regarded as anathema by most commentators.

They have, first of all, re-stated the fundamental dilemma identified by John Maynard Keynes, the twentieth century’s greatest economist. Keynes drew a distinction between investment and speculation. Investment took place, he said, in the real economy and produced new productive capacity. Speculation, on the other hand, was a phenomenon of the financial economy, took place on a short timescale and for short-term purposes, and was often undertaken irresponsibly. The only way, he said, that speculation could be reined in was by regulating financial markets, and this was essentially a task for national governments.

Stiglitz and Patnaik go on to call for action, not just to deal with the immediate crisis, but to make deeper reforms. They want a reform of bodies like the the IMF and the Basel Committee on Banking Regulation, and “a new Bretton Woods” – a UN-brokered international agreement which would regulate the international movement of capital and the volatility of exchange rates. They want a new international financing facility. They make these calls in the interests of a better balanced world economy, and not least to help the Third World which has lost out as a result of both the creation of the credit bubble (in which they had no share) and now its subsequent bursting. The economists are in effect reminding our political leaders of their responsibilities, and telling them that they can no longer leave these important matters to unregulated markets.

In placing these issues back on the agenda, these economists (who are backed up by an increasing number of leading thinkers around the world) are putting our own New Zealand leaders on notice that they, too, must respond with an increased understanding of what is now expected of them. There is a real opportunity for New Zealand to throw its weight behind, perhaps even to help lead, a drive for a new international agreement that would redress the balance of power in favour of democratic governments and against irresponsible markets and thereby protect us all against further instalments of the kind of damage we are now suffering.